When the news broke yesterday that the Justice Department was suing Apple (AAPL) under antitrust laws, claiming that their dominance of the mobile phone market constituted a monopoly, I simply shook my head for multiple reasons. I am not somebody who typically has a knee-jerk reaction for or against regulation.
I recognize that capitalism often needs to be regulated for its own sake. Left to their own devices, people and corporations will be so greedy that they will harm themselves and others. Competition is and always has been the best way to stop that and to ensure that consumers get a fair deal, and as such, should be encouraged.
But at the same time, I don’t believe that success is a reason to punish a company or an individual. A large market share isn’t always the result of unfair practices; sometimes it is just the result of making better products.
The biggest problem I have with this lawsuit is not that it is “unfair;” it is that the whole thing is based on a false premise: Apple does not have a monopoly in the mobile phone market.
True, the company does sell the majority of the mobile handsets sold in America. iPhones constituted 57.93% of phones sold in the U.S. in 2023. That is not what most people would consider a monopoly market share. It is market dominance, for sure, but is it a monopoly?
And if we get a bit less parochial and look at global sales, Android devices account for over 70% of sales, leaving Apple with less than 30%. Is that a monopoly? Not in my book.
Yes, the Department of Justice is at pains to point out in their lawsuit that this is not really about handset sales. The antitrust violation, they maintain, has to do with Apple's ecosystem, the interdependence of phones, watches, Apple Pay, and apps from the app store that they claim is forced on consumers by Apple excluding competition.
The problem with that, though, is that there actually is competition. Around 70% of the world’s mobile phone owning individuals aren’t forced into Apple products and services, so I’m not sure how you conclude that Americans are. Is it because, in the eyes of the Justice Department, Americans are particularly stupid, or is there another reason?
In fact, a dig into the available mobile phone data, as done in this post on the site explodingtopics.com, shows you why iPhones dominate the U.S. market as well as the phone markets in a handful of other rich, Western countries. The clue is in the demographics: the average salary of iPhone users is 43.7% higher than that of Android customers.
In other words, iPhones are preferred over the competition by those who can afford them. In other words, Apple's service is chosen when a customer’s financial situation allows. Maybe I am missing something, but to me, that is a free market in action, not a monopoly.
That doesn’t mean, of course, that their pricing is fair, but it does mean that consumers en masse believe that they are getting value for that extra money. In the American system, that should be the deciding factor. People are free to vote with their wallets and buy Android phones, but they value the products and services within the Apple ecosystem more than the potential savings offered by phones from Samsung, Google (GOOG, GOOGL) and others.
There may be, as the Justice Department alleges, ways in which Apple restricts competition in terms of the apps it allows customers to use on their devices. That, though, is nothing new. An app is an add-on to a device. Compatible and non-compatible add-ons have been a thing ever since manufacturing of devices of any kind began, and consumers clearly don’t feel hurt by Apple’s policies. If they did, they would simply stop buying the company’s products. But they haven’t done that.
Apple has a big share of the U.S. mobile phone market and a decent one globally because they offer products and services that people want. They feel that they can charge a premium for that, and customers agree. That is something to celebrate, not punish.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Martin Tillier
Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.
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